Question

Explain how the balance of payments situation and the non-convertible nature of the Chinese Yuan (Renminbi) has influenced the current trade dispute between China and the U.S.A.

How might differences in a countries political ideology influence its policy with respect to protection of intellectual property rights? Why might this contribute to trade disputes?

Answer 1

The yuan is now on a depreciating trend against the US dollar while the mainland Chinese economy has seen its growth rate slow. Full convertibility of the yuan at current market conditions would lead to a massive outflow of capital.

If a currency is fully convertible, it means that the residents of China can buy property abroad and invest abroad and convert their yuan into dollars.

The imf basket also includes Renminbi. But due to his lack of extensive use, his credibility is low and the dollar is high. If people convert the yuan to full and invest in dollars abroad then the outflow of capital will increase so that China will have a problem in its import, and export will be getter more expensive and dollar will be more and more strong in compare to China s yuan.

The US wants the yuan to be fully convertible so that China has stored the dollar as a forex reserve. He re-entered the international market and dollar value will be strong and it will be beneficial for usa export and will help in reducing to trade deficit with China. This will also make trade war condition severe and trade protectionism more and more.

Even though China has gradually shifted towards capitalism. But he still has socialist traits somewhere in his mind and he gives a lot of preference to what is manufactured in the domestic market and also gives patents so that patents made abroad are not able to come in the easily market.

China's rule with protectionism over intellectual property rights. That is why China does not give validity to IPR in its domestic market, even if it does, it tries to get information related to the transfer of all the technology related technology and what kind of process has been adopted in it.Intellectual property rights created in the US are not being considered as big level in China, which has also proved to be an important role in the growth of trade war.